Ideally, when you shop FHA home loans online you should be comparing loan companies online to find the best FHA lenders before you search for your dream home. Approved FHA lenders can pre-approve you for a loan amount so that when you find the right home, you can move on it right away. This is also where it comes in handy to look for FHA lenders that have experience with government loans and make sure the lender you are talking to is approved for FHA lending in your state, as they will step you through the process quickly and easily. The pre-approval process will set FHA loan limits for your specific finances, letting you know your price range up front.
So, when you want the best FHA lenders, start by comparing lenders online, focusing on approved FHA lenders. Make sure the lender you are talking to is approved for FHA lending in your state. Look for FHA lenders that have experience with government loans, and get pre-approved within the FHA loan limits so you can find and purchase the right home for you and your family. Getting pre-approved for a FHA loan means that you will receive a letter from the designated underwriter notifying you that you are pre-qualified for FHA financing pending the specified conditions enclosed in the pre-approval. (ie. Appraisal, income documentation, verification of employment, etc.)
As the housing market and mortgage industry continue to struggle, government mortgage programs have become more important than ever. When you are considering a FHA refinance, make sure you are comparing loan offers from mortgage companies that have experience funding FHA loan programs.
As the housing sector and American economy continue to struggle, FHA mortgage rates have declined to the lowest point of the year. As usual, bad news in the economy has help create good news with the current FHA rates dropping. This should help loan companies that provide government financing like FHA mortgage programs that slowed down drastically after HUD raised FHA insurance premiums last month for the 2nd time in the last 6 months. The noteworthy drop in FHA interest rates could help off-set the insurance rate hikes.
The US Government has the Ability to Stem the Foreclosure Crisis with Aggressive FHA Home Loans
Even with inflation concerns coming into focus, the Federal Reserve has kept the key interest rates at nearly zero percent. Fed Chief Bernanke has kept his promise of doing everything he can to help the housing industry rebound because Americans have access to the longest streak of affordable home financing that we have seen in a century. Still with home values falling for 37 consecutive months you have to wonder what it will take to get the housing sector back on track. Former Ditech mortgage executive, Jeff Morris said, “Lenders could drop rates to 2% and home values would still be hindered because it’s the tight mortgage guidelines and unreasonable requirements for lending that are preventing millions of Americans from refinancing mortgages and preventing millions of consumers to become first time home buyers.” Morris continued, “The FHA mortgage rate is amazingly low and affordable but it is not accessible for a high percentage of Americans who simply don’t qualify with today’s tighter conventional and FHA guidelines.”
Get Approved for the Lowest FHA Rates in 2011
Many loan professionals believe the 2011 FHA requirements have gone too far too quickly. Too many homeowners have been hung out to dry with adjustable rate mortgages that they cannot afford but refinancing with FHA or a traditional lender simply is not an option because they do not meet loan eligibility. Homeowners should have been given a grace period to refinance before banks and lenders tightened refinance and purchase money guidelines. The pool of qualified borrowers for mortgage refinance and home purchase loans has shrunk to the lowest level in decades. Food and energy costs have skyrocketed yet most Americans are making less. With a 9% unemployment rate, we anticipate FHA rates will remain low for the rest of 2011 and into 2012.
5 Recommended Changes that FHA Should Incorporate to Help the Housing Sector Rebound
- Eliminate the FHA Minimum Credit Scores for Home Loans – One of the keys to FHA’s success has been their flexible criteria with credit. Qualified borrowers have been benefitting from bad credit refinancing with FHA for decades and the default rate has always been minimal because FHA underwriting has been good at approving loans that make sense.
- Revert back to 2009 Rate for FHA Premiums – This will lower the housing expenses by hundreds of dollars a month for many homeowners in the high cost regions like California, Colorado, Connecticut, Florida, Washington DC, Virginia, New Jersey and New York.
- Allow Mortgage Refinancing to 125% for rate and term transactions for homeowners that have not been late on the mortgage in the last 24 months and who have had their home loan prior to 2008.
- Enable homeowners to consolidate 1st and 2nd mortgages together up to 100%. Many homeowners have credit lines and 2nd mortgages with high interest rates and they do not have enough equity to refinance.
- Keep the FHA loan limits at 2008 levels. This will help homeowners leverage the low fixed 30-year mortgage rates and provide peace of mind and protection against inflation and rising interest rates.
Loan officers lenders and borrowers are starting to get a bit nervous about FHA lending being adversely affected if the government shuts down. In a recent article written by Brian Collins of Origination News, posed some interesting questions about how the FHA mortgage loan programs could be affected if the U.S government shuts down on Friday. Since FHA has a significant market-share in home financing, there certainly could be some dramatic setbacks. While FHA is best known for first time home buyer loans, the government finance agency has a wide variety of FHA mortgage programs for refinancing and home purchasing.
According to FHA commissioner, David H. Stevens, if the government does shut down, HUD will be forced to stop endorsing new FHA home loans. At this point Congress will have to come together and agree to budget deal with the Obama Administration by midnight Friday.
Will Government Shutdown Cause a Bottleneck for FHA Loans?
According to a memo drafted by a housing trade group, “FHA cannot offer endorsements for any new FHA home loans in the Single Family program and are not allowed to make further commitments in the Multifamily if the government shutdown happens.” FHA lenders will need to brace for the government shutdown or shift gears with conventional loans backed by Fannie Mae and Freddie Mac.
HUD Secretary, Shaun Donovan discussed his homeownership vision a few days ago when he underlined the new direction that FHA is heading in an effort to prevent future housing bubbles and risky lending philosophies. According to Donovan, “The mentality of kind of using homes as ATMs that we got to three years ago—don’t mistake that with the long-term, fundamental belief that most Americans had in their homes not as piggy banks, but as a place to raise their kids, a place to invest in, and, in the long run, a place to build equity in that they could pass on to their kids and their grandkids.”
According to analysts at Keefe, Bruyette & Woods last year, the Federal Housing Administration insured almost 40% of all home loans totaling $200 billion. According to the government sponsored enterprises regulator, the government shutdown would not stop Fannie Mae and Freddie Mac from buying and securing home mortgage loans. The GSEs are in conservatorship and dependent on a Treasury Department line of credit to stay afloat. Nevertheless, the terms of the conservatorships and Treasury’s support is not affected by the budget process.” According to a statement issued by the Federal Housing Finance Agency a government shutdown would not impact the operations of Fannie Mae and Freddie Mac as the Treasury Department Preferred Stock Purchase Agreements with the Enterprises are not subject to the annual appropriations process.”
The housing boom a few years ago really drove up home prices and the need for super jumbo loans became evident. FHA jumbo loans have become quite popular in states like California, Florida, Virginia, Maryland, DC and Connecticut. Any Over the last few years, HUD has become more accommodating to borrowers in high cost regions who need mortgages that exceed the FHA loan limits. In most cases, getting approved to refinance FHA loans is not as difficult has non-conforming loans that most traditional lenders are offering.
 What is a Super Jumbo Loan? Mortgage professionals consider any loan amount over $650,000 to be a super jumbo. They also consider any loan insured by the Federal Housing Administration that is greater than $417,000 to be a FHA super jumbo.
What to Expect – Many homeowners have found that jumbo mortgage refinance programs are not as accessible as they were just a few years ago. The reality is that the secondary mortgage market has strayed away from jumbo lending and private money sources have tightened their requirements significantly. These non-conforming loans typically are offered at a higher interest rate and more equity is sometimes needed for FHA refinancing.
For the third consecutive week FHA mortgage rates were lower than conforming rates. FHA rates were available as low as 4.625% on 30-year fixed rate mortgages and conforming rates averaged 4.875%. HUD offers FHA insured home loans to qualified borrowers in an effort to promote fair lending. FHA mortgage rates remain at an affordable level for borrowers seeking new home loans and mortgage refinancing
- FHA Refinancing
- First Time Homebuyer Loans
- Energy Efficient Loans
- Home Improvement Loans
Keep your eye on FHA mortgage rates in 2011 as many economists are predicting a trend for higher interest rates. Conforming rates have started to rise and FHA rates could be next. With FHA loan guidelines getting tighter it makes sense financially to get approved now for a FHA loan that meets your needs today.
It’s no secret that guidelines for FHA refinancing have tightened significantly in recent years. It wasn’t so long ago that FHA lenders were unique because they offered bad credit mortgage solutions to borrowers that had compensating factors like hardships. Consumers loved FHA refinance programs because they enabled “outside of the box” lending that looked beyond the credit score. If a borrower could demonstrate they had the ability to make the loan payment on time, then in most cases they would get approved for FHA refinancing.
If FHA rates drop, then a borrower could get access to the streamline loan that enabled quick and cost effective rate and term refinancing. FHA refinance rates continue to be available in the 4.625 to 5% range which is phenomenal for a 30-year fixed rate home loan. We recommend comparing refinance loan quotes while rates are so attractive.
FHA Refinance Tips
- If you are having trouble qualifying due to lack of equity and already have a FHA loan, request a FHA streamline. In most cases, there is no appraisal with FHA streamlines, so borrowers may qualify regardless of equity.
- If you are having difficulty getting approved for FHA refinancing, but have good credit and a salaried job, then the streamline may be the solution, because there is no income documentation required.
- If your mortgage is underwater, (mortgage balance is greater than your home value) then request a FHA short refinance. This unique loan could result in a principal balance reduction.
When FHA refinancing or taking out a second mortgage for cash out, there are many things you should consider. First of all, ask yourself this question. Is this cash out loan going to have implications in the future. In other words, “Will it prevent you from getting a loan in the future?” Depending on the circumstances a cash out loan certainly could. It is always wise to consider the implactions before committing to any type of FHA home refinancing or second mortgage.
- FHA loans allow cash out refinancing to 85%
- FHA offers a 203k loan for home rehabilitation purposes up to 115%
- HUD has started putting CLTV restrictions on FHA refinancing.
- Second Mortgage Subordinations are allowed but most lenders.
Second mortgage financing must meet the following requirements:
> No prepayment penalty allowed
> No balloon payments less than ten years
> Payments on FHA 1st mortgage and subordinate 2nd mortgage liens, plus other housing expenses, cannot exceed borrower’s capacity to repay. Any periodic loan payments due on the second mortgage are due monthly and are essentially the same in dollar amount.
One advantage of getting cash out with a FHA loan is that you only have to deal with one investor when considering a refinance in the future. If you take out a 2nd mortgage or home equity loan, you would like have to deal with multiple investors and that could prevent you from refinancing depending on the lenders guidelines. HUD used to allow subordinate financing and second mortgages up to 125% but HUD has significantly revised the FHA guidelines in recent months.
The Housing of Urban Development (HUD) has made it clear that in the FHA credit standards are changing for 2011. HUD and the Obama administration have several goals they have outlined to improve the credibility of their flagship FHA home loan programs. The first goal is to bolster the FHA loan reserves and the second goal is to reduce loan defaults and foreclosures.
In order to accomplish these goals, HUD must tighten the FHA guidelines and increase the accountability for FHA lenders with more comprehensive FHA loan requirements. FHA credit score minimums have never been enforced in the past because HUD always prided itself that the FHA loan guidelines enabled underwriters to consider a borrower for government financing based on all of their credentials rather than just a credit score.
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* Higher Down-Payments for Bad Credit
* FHA Credit Score Minimums
* More Equity for Refinancing w/ Bad Credit |
Is this End of Bad Credit Home Financing for FHA?
* Minimum credit score at or above 580 are eligible for maximum 97.5% Loan to Value for FHA financing (3.5% down-payments required with purchases).
* Minimum credit score between 500 and 579 are restricted to 90% Loan to Value for FHA finance options (10% down-payment required).
* Minimum credit score of less than 500 are not eligible for FHA- mortgage loans insured by the government.
* FHA borrowers with a non-traditional credit history or insufficient credit are eligible for maximum financing if they otherwise meet FHA guidelines.
* Borrowers using 203(h), Mortgage Insurance for Disaster Victims, are eligible for 100% mortgage financing and no down-payment is required. However, FHA borrowers must have at least a 500 credit score to be eligible.
In a few days, the government will be launch the latest mortgage relief effort with the FHA short refinance program targeting homeowners who are struggling with an underwater mortgage. The FHA short refinance program has also been called the Emergency Homeowner Loan Program. The only catch for eligible homeowners is that they must have a stellar record of timely mortgage payments before qualifying for FHA refinancing under this program.
Take advantage of Refinancing Underwater Mortgages with the FHA Short Refi Program
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The FHA Short Refinance loan was created to assist distressed but responsible homeowners who owe more on their home loan than their house is worth because their local markets saw significant declines in property values. The FHA short refinance program will kick off on September 7th. FHA rates remain at record lows, so this should be a very popular loan program as approximately 35% of homeowners in the U.S. are said to have an underwater mortgage. |
FHA will offer this mortgage relief opportunity to specific non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least 10 % of the unpaid balance of the first mortgage. The new mortgages would then be FHA-insured. The borrower must have a credit score of at least 500 and the house must be the homeowner’s primary residence.
To be eligible for FHA’s Short Refinance program, a homeowner must meet the following criteria:
• Borrower must have a mortgage underwater (negative equity as mortgage is greater than property value)
• Homeowners must be current on their mortgage
• Borrower must live in their home (primary residence)
• Borrower must have a minimum 500 credit score
• Homeowner must have an existing non-FHA loan
• Existing mortgage lender must write down at least 10% of the unpaid balance
• Refinance the new FHA mortgage to a loan-to-value ratio of no more than 97.75 %.
In addition, the first mortgage being refinanced must have a maximum loan-to-value of 97.75 %. Some FHA lenders are exciting with the government’s aggressive approach to help homeowners find a solution for refinancing underwater mortgage loans. Banks are more willing to negotiate with borrowers who delinquent on their first or second mortgage. Many FHA lenders will not consider writing down loan balances or extending loan modifications unless homeowner can demonstrate that they can afford their home. FHA Commissioner David Stevens said the government is “throwing a lifeline” to families, giving homeowners and lenders another tool to battle the problem of negative equity facing borrowers current on their mortgage.
The Federal Housing Administration has been steadfast with regards to FHA mortgage assistance and foreclosure prevention programs. For the last few years, the one loan program that struggling homeowners could turn to was the FHA home loan. With the approval of Congress, both the Bush and Obama Administration have extended financial aid in the form of FHA mortgage relief.
HUD, Fannie Mae and Freddie Mac have come together to create targeted loan relief to borrowers who financial hardships, like a loss of home equity, employment issues and even bad credit. FHA loan requirements have tightened somewhat in the last few years, but there are still significant opportunities for homeowners to receive financial assistance with FHA home refinancing. FHA confirmed a new program, the FHA short refinance and it will go live on September 7th. This refinance program will actually enable homeowners who are underwater to refinance into a lower mortgage balance. To qualify, homeowners must be current on a non-FHA loan to refinance into an FHA mortgage when their lender agrees to write off at least 10% of their principal.
US Government Continues to Fund FHA Mortgage Relief Programs Listed below are the unique conventional and FHA loan programs created to provide mortgage relief:
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FHA Secure
Hope for Homeowners
Home Affordable Refinance Program
Home Affordable Modification Program
Second Mortgage Modification Program
FHA Short Refinance
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US Government Continues to Fund FHA Mortgage Relief Programs
Today FHA mortgage rates have fallen to record levels. Qualified borrowers can lock a 30-year fixed loan with a rate of 4.125% and the 15-year loan features a rate 3.875%. Don’t miss out on these once in a lifetime home financing opportunities.
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